MM--Past, Present, Future

Abstract

[This is a comment on "The Modigliani-Miller Propositions after Thirty Years" by Merton H. Miller in this same issue.] Before getting serious about the MM theorem's past and future, I would like to say a few words about its more personal history, including the origins of the Modigliani-Miller alliance. Miller has reviewed, in his usual masterly fashion, the validity and working of the MM theorem under conditions of perfect markets and no taxes. There seems little to add to that subject, especially since, by now, countless alternative proofs of the theorem have been provided. So I would like to come back to some issues that are still with us -- and probably will be for a long time. How should the MM propositions be modified in the presence of taxes and how well do they perform in accounting for observed behavior?